The first job gives us a taste of independence. It is an assurance that we are no longer financially dependent on anyone. Buying a home is the second step to it. The confidence we get from having a roof over the head is beyond words. Many people are sceptical about buying a house with their first job. If you are one of them, this piece of information is for you. Check out how we can lock home loans with our first job and fulfil our dreams.
Everyone thinking about buying a home with their first job needs to understand some crucial things before applying for a home loan. These aspects help us delineate the facts related to procuring and clearing the loan. They also make it easier for us to decide upon buying a house with a loan or leaving it. Have a look:
- Job Stability: We need a stable job and regular income to be eligible for a home loan. We also need to have an excellent career as the banks need assurance of repaying.
- Credit Score: It is something to worry about as we don’t have a credit score. Banks rely more on the credit score in case of loan sanctions. So, build a good credit score before applying for a loan.
- Tenure: Home loans exist for longer durations and are long-term commitments. Banks usually give 20-30 years to repay the loan. Unless there are job stability and regular income, it isn’t wise to apply for a home loan.
- Costs: Home loans involve huge costs. The expenses of constructing or buying a home range between lakhs to crores depending on the place. We also need to keep in mind that home loans take away flexibilities like higher studies and other expenses.
- Guarantee: The banks require a guarantor to sanction home loans. The co-applicant or guarantor can be the father or mother. Note that the guarantor should also be an earning person.
- Down Payment: Even though the banks sanction the loans, it is only 75-80 per cent of the total requirement. So, we need some extra amount in hand to complete the purchase.
There are always two main aspects that reflect our ability to repay the loans. The credit score depicts the willingness of a person towards loan repayment, and the income shows his/her ability to repay the home loan. So, having prior job experience isn’t a serious concern.
We can begin with the loan proceedings once we are sure of the pre-requisites mentioned above. Since most people pay EMIs, we need extra attention here. It would become tough to manage if 60-70 per cent of our monthly income goes to the loan’s instalment. So, people usually prefer the lengthiest term for loan repayment, which isn’t always beneficial. Here is how the loan processing takes place:
The common mistake most people commit is choosing the longest tenure for repayment, as mentioned above. But with proper calculations, we can understand that we sometimes pay more than required by picking long durations. Take some extra precautions like keeping the EMI within 50% of the monthly salary and ensuring that the loan amount is 70-75% of the entire cost. Also, calculate the repayable amount based on the tenure and EMI and then decide the best timespan.
Fixed and Floating Rates
The choice between fixed and floating rates depends on the current market scenario. Fixed-rate loans come with higher interest rates and pre-penalty charges. But there are no additional repayments or burdens in the end. Flexible rates come with no penalty and are contrary to the fixed ones. So, choose the one that fits in with your house and income.
Prepayment and Foreclosures
Though home loans are for 20-30 years, many people manage to repay them well in advance, which happens because people usually make prepayments in between. There are no foreclosure charges for floating-rate loans. But banks charge some amount for fixed loans varying between 1 and 3 per cent of the total loan amount. So, check with these charges before proceeding further.
Choose the Bank
Picking the right bank is equally essential as the above factors. We have various considerations for making this choice. Some of them are customer services, past base rates, turnaround time, and offers from the bank.
Once we have a proper sense of our loan requirements and how to proceed further, it is pretty easy to pick the right bank and start the home loan procedure. We can make our dream come true with our first job by putting all the above factors together.